45

FEBRUARY 2006
www.MPNmag.com
A
A
s the industry heads into Indy for the Dealer Expo,
we find ourselves swimming in a sea of articles
proclaiming scooters are the fastest growing
segment of the powersports industry. But are the little
tiddlers really right for your dealership? Is
there really as much potential growth in
the scooter market as the importers would
have you believe? Rather than speculate, we
went to somebody who is directly involved in
the scooter market on a day to day basis
Malaguti importer and MRP scooter
accessories guru Joel Martin. After more
than a decade in the trenches, both on an
OE and aftermarket level, Joel is uniquely
positioned to see beyond the smoke and
mirrors surrounding the
scooter market. I talk
to dealers every day,
so it is no surprise to
see the amount of
misinformation that
is out there about
the scooter
market, he
notes. In Part I
Joel gets to the
bottom of the
scooter craze
and next
month look
for tips on
making the
scooter
market work
for you.
Meanwhile,
Managing
Editor Colleen
Malloy offers
a closer look
at another
contender in
the scooter
contingent: The
Genuine Scooter
Company.
46
FEBRUARY 2006
www.MPNmag.com
T
T
here certainly are more advanced scooter dealerships
serving the market with new and interesting concepts
America features the most diverse scene of retail outlet
operations for this method of transportation in the world. There
is everything from the department store style mega-dealerships
to the big box discount retail chains such as BJs/Sams
Club/Target at one end of the spectrum down to the Vespa
boutiques, used car lots, vintage scooter repair shops and the
mom and pop retailers which are the backbone of this industry.
Every day people of varying mechanical backgrounds are opening
up scooter shops all across America; thanks in part to the rising
number of scooter brands entering the marketplace.
What started as a couple of established European brands, a
couple Japanese OEM offerings and a handful of inexpensive off-
name brands has ramped up to 44 Asian importers alone! A
good portion of these brands from Asia are here to stay whether
to become part of a growing scene or just wreak havoc on pricing
is anyones guess, but as they say, caveat emptor! Ask yourself
key questions including: Why are sales rising? Where are they all
made? Who makes what? Is this bike DOT-approved? And my
personal favorite: Is this really a Honda?
This background information should help you understand why as
a dealer you should purchase scooters and accessories from
suppliers who are trying to build sustainable networks and a
profitable scooter scene in America and not just purchase the least
expensive brand offered to you at the Indiana show this year.
The First Rule
Of Scooter Club
Remember the movie Fight Club? Well, the first rule of scooter
club is that nobody knows anything. The second rule of scooter
club is that nobody really knows anything.
According to the Motorcycle Industry Council (MIC), U.S. scooter
sales increased from 12,000 units in 1997 to 48,445 by 2004.
MIC estimates the real total at around 86,000 units (when
factoring in non-reporting companies). I suggest this number is on
the conservative side. As the Malaguti importer, I never reported
any of the Malaguti scooters sold in the U.S. and I know many
others in the industry do not report their sales figures to MIC.
Actually, there are just a handful of OEM MIC members, and only
a couple of them are involved in the scooter market. (Just so were
clear there is a membership fee to enter the MIC. Nor is it mandated
by law that you become a member, so most of us small scooter-only
importers dont join since theres no benefit to joining except for the
booth discount at the Dealer Expo or inclusion in press releases
which mostly mention Vespas return to the U.S. market).
These numbers do not take into consideration a significant
number of players that have entered the market since 1997
both legal and gray market importers who the MIC doesnt track.
You cant even rely on state registrations because most states
classify them differently, dont release figures, or as in the case of
Puerto Rico, dont require scooters to be registered at all.
Remember those 44 companies? Its no surprise that the
majority come from Asia, but it isnt just China. These days
they come from all over, including India, Korea, Taiwan,
Vietnam and, of course, mainland China. Love them or hate
them, they are here to stay. My personal estimate of the actual
number of sales is around 125,000 units for 2005. Thats not
huge compared to a population of almost 300 million, but
what is striking is the consistent growth of 9% to 17% each
year for the reporting companies.
Looking at the numbers reported by the MIC, the majority of
the sales in the U.S. are not Vespas or big displacement luxury
scooters but the basic 50cc Japanese bikes. Honda and
A
Joel Martin
A
couple of months ago MPN asked for a
scooter experts opinion on some of the
crazy things that have been happening in the
scooter market. Like my Fight Club analogy suggests,
nobody seems to know everything about this
business, but if theres such a thing as a scooter
community veteran, then Ive done more than a few
tours of duty. I started off back in 1995 by helping
out my father at his car dealership after school
selling used 49cc scooters. Five years later I
officially entered the industry by working for an
Italian manufacturer (Malaguti), later becoming
their U.S. distributor, and I eventually worked with
several leading distributors in the country to help
them set up their scooter operations. Since then I
have seen this industry develop, change, renovate
itself and evolve over the past decade. I guess Im as
qualified as anyone to comment on the scooter
scene. Back when I first started, there were only
three major importers in the U.S. bringing in
scooters from Europe and only a handful of
inexpensive imports from Asia besides the big two
Japanese OEMs which continue to dominate the
industry; Yamaha and Honda. Scooter sales just
werent that impressive back then, but year after
year the sales figures have continued to grow and
now scooters are suddenly the hottest selling
segment of the powersports market.
Joel Martin
47
FEBRUARY 2006
www.MPNmag.com
CIRCLE 31 ON REPLY CARD
Yamaha leads the numbers game because of a combination of quality
product and an extensive distribution system. Suzuki reported sales for
only two units, their high-end 400cc and 650cc Burgmans. The real
majority of sales in America are mainly 50cc clones based on the
leading two models, the Yamaha Vino and Honda Metropolitan,
manufactured by mainland Chinese companies . You will probably see
lots of these in the Chinese Zone at the Dealer Expo.
The Second Rule Of
Scooter Club:
Nobody Really Knows Anything
About ten years ago the motorcycle industry woke up to the fact
that China was increasing its production to about 40% of global
unit output. It became the worldwide leader in motorcycle
manufacturing, outpacing its Asian rivals Taiwan, Japan and
Korea. Despite the global domination of the Chinese in
scooter production, Taiwan remains a strong contender for
U.S. market share with several major scooter manufacturers
currently exporting to the U.S., including ETON, KYMCO,
PGO, Standard Motor Company, SYM (at one point I
imported these as well) and TGB, among others.
These Taiwanese based company beat their mainland
China competitors to the punch because until about
2002, most developed markets such as the United
States and Europe were exempt from the mainland
Chinese invasion due to the products relatively poor
quality, inability to pass strict EU regulations, and the
lack of a strong distribution system on the part of the
Chinese manufacturers. The first few mainland-made
scooters we saw in the U.S. were manufactured by
Jianshee, Jincheng and Sundiro.
Despite the initial quality issues, Americas appetite
for inexpensive scooters grew and many distributors
started looking for better quality product to import from
Asia. The rise in MIC numbers is mainly due to the fact that
the average scooter dealer cost in America for the past five
years has been in the $1,000 to $1,600 range with
European scooters at the high end. Meanwhile, the average
cost of a 50cc scooter from a factory in China has been
around $300 to $400 for the past few years, despite rising
retail prices around the world. This meant that any
interested party could go to China and make good margins
on really cheap goods. In fact, these margins have attracted
the attention of big name brands who wanted private label
scooters including some well-known sporting goods outfits
and the buyers at Target, Pep Boys, Costco, etc.
Adding fuel to the fire is rising transportation costs. On
average we still have some of the lowest gasoline prices in
the world, maintaining the average price per gallon under
$3. Currently in Europe they pay more than $5 a gallon and
they are one of the largest scooter markets in the world, so
obviously there is a correlation between inexpensive
transportation and gasoline prices.
The Rise And Fall Of
The European Empire
Scooters and Europe have always gone hand-in-hand in the
average American dealers mind. This can be easily attributed
to the incredible marketing job done with the original Vespa
and more recently, the job that Piaggio has done in making
its Vespa brand synonymous with scooters. Back in 2000,
there was an overnight boom in scooter sales overseas. Due
primarily to government incentives and high gas prices,
scooter sales reached an all-time high in Europe. Companies
like Aprilia over-expanded and then watched millions vanish
as they built a distribution empire across the world, including
the U.S. At the time many companies including Malaguti
looked at America as the place where they could continue to
grow and also tried to expand.
The demand was so high for European product that I
would find gray market importers
bringing Malagutis into San
Francisco and selling $2,000
scooters for $4,000! The demand
for European scooters continued late
into 2002 as we saw gray market
importers even bringing in Peugeot, one
of the most expensive European
brands, without being authorized
by the factory in France. We
also saw attempts to revive
the Italjet brand and import
Benelli scooters at one point,
despite their incredible
factory prices.
However, none of us on
that side of the business
could have foreseen the
devaluation of the dollar
over the past few years.
When I first started importing
Malaguti, the dollar would get
1.12 Euros, but by December
2004 the Euro was trading
at $1.37 meaning that any
company importing from
Europe had gradually
lost over 40% in the
exchange rate. To make
matters worse on the
home front, a change in
licensing laws and a
easing of government
subsidies created the
worst bust in the history of Italian scooter sales.
The competitive nature of the European market was further
troubled by rising Asian tigers. New brands such as SYM and
KYMCO were quickly eating up market share once held by the
European brands. Even joint ventures such as the previously
profitable MBK-Yamaha operation ceased their European
production in order to be competitive.
Piaggio decided to focus on survival by acquisition and
began the first round of European mergers to decide the
fate of European-made scooters. In 1980 there were more
than 100 moped/scooter manufacturers in Italy alone. In
2001, when I began working in Italy, there were six main
scooter manufacturers left: Aprilia, Benelli, Beta, Italjet,
Malaguti and Piaggio/Vespa. Since then, we have seen Beta
stop manufacturing scooters, Benelli was sold (by the
Chinese!) to avoid foreclosure, Italjet has closed its doors,
Spanish scooter maker Derbi was purchased by Piaggio,
and eventually Aprilia was purchased out of bankruptcy
court as well. By 2006, the only two remaining Italian-
owned operations are the Piaggio Group (now comprised of
Aprilia, Derbi, Gilera, Vespa, etc.) and Malaguti Moto.
So what does this have to do with Asia? Well, frankly
everything. Malaguti and Piaggio are both looking to Asia for
their futures. Malaguti is currently the largest assembler of
Yamaha vehicles in mainland Europe for scooters and dirtbikes.
Both companies continue to reorganize and have America in
their long-term sights. Both Malaguti and Piaggio face
extraordinarily high labor costs in Italy, employment
regulations, and a lack of raw materials in Europe which have
lead them to look at China for their future competitiveness with
Piaggio taking the lead due to its now enormous corporate size.
Suppliers in Italy and in Europe have also been closing or
moving production to Asia showing that even for Italian
companies, the China threat has been real.
Despite their struggles,
some good news for Italian
brands has come out of
Asia. Companies such as
Italjet are being reborn by
manufacturing their
designs in India with
Kinetic. This caused a big
buzz at the EICMA show in
Milan this year, and many
people have wondered who
the new importers for the U.S
will be.
Benelli was also present at
the show in spite of rumors
that it had closed for good.
Benelli was recently purchased
by the Qianjiang Group, and I
had a chance to talk to the new
managers. Qianjiang currently sells
to several distributors including
Mondial, Powersports Factory and
Vento North America. They have
plans to begin exporting the scooters
directly from China to their U.S.
distributors sometime in 2006 under the
Benelli name. Be on the lookout for updates at
this years Dealer Expo.
Japan Inc.
Loses Its Grip?
Many dealers call me and ask if their scooter really is a
Yamaha or a Honda? The answer is, well sort of. Let me
explain, in the late 90s, the Japanese Big Four decided that
the growing Chinese presence could not be ignored. The Big
Four were tackling issues that had to be attached head on
48
FEBRUARY 2006
www.MPNmag.com
49
FEBRUARY 2006
www.MPNmag.com
CIRCLE 32 ON REPLY CARD
such as rampant design copying, price wars with suppliers, soaring labor costs
in Japan, and the increasing market penetration from Mainland China
manufacturers. Like the mythical hydra, Chinese factories were popping up
left and right, so it seems that the Japanese OEs decided that if they
couldnt beat them, they would join them.
Honda is the fastest mover so far among the Japanese motorcycle makers. To
date, it has established four motorcycle-making joint ventures in the separate
motorcycle hubs in China: Wuyang-Honda in Guangzhou, Jialing-Honda in
Chongqing, Tianjin-Honda in Tianjin and Honda-Sundiro in Shanghai. If any of
these names look familiar its because you might have seen it on the side of a
bike at your local Pep Boys. Honda might be a part owner of these factories,
but in some cases they have little or no control on how their partners
choose to compete with Honda product abroad. As the the best and
biggest motorcycle company in the world, Honda has made sure
that their agreements state that these units are not to be exported
to the U.S., but agreements are extremely hard to enforce in the
wild west of Chinese capitalism.
Each market in Asia is increasingly difficult to penetrate since
each market has a force that dominates sales in a particular
country in Korea it is Hyosung and Daelim (both former
Japanese subsidiaries). This has been the key to some of
these players entering the U.S. market, since you cant
visit the Daelim website without being reminded that
this was Honda Korea at one point just as KYMCO
and SYM were both originally part of the Japanese
affiliate in Taiwan. This simple reality has given a lot
of credibility to these new scooter brands.
However, with that credibility comes an equal
amount of confusion. One of the biggest issues facing
Asian brands is its homogenous product. Entire bikes
are easily copied in countries without enforceable
copyright laws. As these models come to the U.S., more
and more distributors are seen selling bikes which
appear identical, except for the stickers. Case in point
models imported by Diamo, United Motors, Vento, Tank
and now even TNG can appear identical to the naked eye.
50
FEBRUARY 2006
www.MPNmag.com
This leads to more end user confusion than anything else since dealers (hopefully)
buy based on the distribution network, price, spare parts availability and other
factors such as warranties.
Speaking of a warranty, more distributors are now increasing their
scooter warranties from two years to a full four years. Just two years ago
the industry standard was a one-year warranty and before that no
warranty at all was the norm. Having the same molds is leading
these distributors to pay attention to parts, service and support
since they are all competing for the same customers with the
almost
identical
product
derived from
some Honda or Yamaha designs.
Even mid-priced brands such as
KYMCO have had to raise their
standard warranty up to three years to
help differentiate themselves from the lower
priced brands. Since they have higher margins, they are
using these gains to pay for the increase in customer
service. However, it isnt brands like KYMCO that are
creating problems for Honda and Yamaha, but rather off-
brands whose quality Honda would never allow for export
yet still come into the U.S. bearing similar names and
styling identical to Honda products. These off-brands
continue to push to get into the U.S. by any means possible
due to the high margins in America (and until just recently,
the ease of entry in the U.S. ports).
How can we blame these manufacturers for wanting a piece
of the American dream? In 2002 the United States was the
second highest importer of Chinese motorcycles and scooters,
importing 422,000 units ($55 million), representing 8.5% of
overall motorcycle annual export value. This number has now
multiplied making the American powersports industry even
more reliant on China as a source of its
profits. The U.S. market is huge, and
mainland makers will do everything in
their power to hold on to it or enter it
including importing brands with Honda
or Yamaha labels. Yamaha and a U.S.-
based importer recently settled their
ongoing argument over a brand called,
of all things, Yamoto.
My biggest suggestion when dealing
with new Asian brands is to do your
homework and not base your decision
on sales reps brochures or unit pricing.
Like everything in life, you need to talk
to other dealers, find out who makes the
product, what aftermarket support is
available, if they are investing in
expanding the scooter scene, and how
long theyve been in the market. Buying
from these more reliable companies will
hopefully continue this scooter boom we
are seeing and build a sustainable
network for years to come.
If you need some advice or what
brands to pick up, you can always write
me. Good luck at the Dealer Expo in
Indiana this year. You can reach me at:
Joel@mrp-speed.com.
CIRCLE 33 ON REPLY CARD
CIRCLE 34 ON REPLY CARD
1be 8Iock Co| is o reoI bIos||
knobby |ires, ruqqed buiId,
ond |omiIior eye-oinq
qrobi cs. A |un, reI i obI e
50cc ou|omo|ic 2-s|roke.
Go obeod, Iiqb| one o|||
Our new 8uddy, ovoiIobIe os
o sri|eIy 50cc 2-s|roke or o
|orquey 125cc 4-s|roke. CV1
|ronsmission, qreo| susension
ond brokes, in 8 swee| coIors.
Losy |o ride, eosy on |be woIIe|.
www. gera| rescooters. co
5400 N. DAMLN CH|CAGO, |l 025
(778) 271- 8514 (877) MY-81LllA
OlD 8CHOOl. NLw 8CHOOl. 8k| 8CHOOl.
8|eIIo's cIossic s|eeI body is
|be reoI deoI. LIec|ric s|or|.
Iour-seed monuoI |ronny.
8|os on o dime. 7 qreo| coIors
ond o |ruckIood o| ovoiIobIe
occessories. A s|yIisb scoo|er
|bo| mokes everyone smiIe.